RLI Insurance Co. v. Russell

United States District Court, D. Kansas

July 12, 2018

RLI INSURANCE COMPANY, Plaintiff,v.PAUL RUSSELL, et al., Defendants.

MEMORANDUM AND ORDER

ERIC
F. MELGREN, UNITED STATES DISTRICT JUDGE

This
case is back before the Court more than two years after the
parties reached a settlement agreement and dismissed the case
without prejudice, pursuant to Fed.R.Civ.P. 41(a)(1)(A)(ii).
It makes its return upon Plaintiff RLI Insurance
Company's (“RLI”) Second Motion to Enforce
Settlement Agreement. Because the Court lacks jurisdiction to
enforce the settlement agreement, the Court denies RLI's
motion.

I.
Factual and Procedural Background

RLI
initially filed its complaint on September 23, 2014. The
parties eventually settled following court-ordered mediation
held on April 22, 2016. RLI filed a Motion to Enforce
Settlement Agreement on June 29, 2016. The Court did not rule
on that motion because the parties filed a Stipulation of
Dismissal on June 30, 2016. On May 29, 2018, RLI filed a
Second Motion to Enforce Settlement Agreement. Defendants
have not filed a response to RLI's motion, and the time
to do so has passed.

The
parties agreed that Defendants would pay RLI a sum of $16,
000, by an immediate lump sum payment of $10, 000 followed by
12 installments of $500. It is unclear from RLI's motion
what the remaining balance is.

The
settlement agreement contains a provision pertaining to
default. If Defendants fail to timely pay an installment, the
agreement provides the procedure RLI must follow to demand
payment. If Defendants default three times, or fail to cure a
default, then RLI is permitted to file a consent judgment
against Defendants Joshua Allenbrand and Paul Russell, Jr.
for $20, 000.[1] Any payments the Defendants had made would
be credited to the $20, 000 consent judgment.

II.
Legal Standard

Federal
courts are courts of limited jurisdiction, and the Court has
a duty to examine whether it has authority to hear the merits
of an action.[2] The burden of establishing jurisdiction is
on the party “who claims that the power of the court
should be exerted [on its] behalf.”[3] The Court has
subject-matter jurisdiction over an action if it arises under
(1) federal-question jurisdiction or (2) diversity
jurisdiction.[4] Diversity jurisdiction requires complete
diversity of citizenship between the plaintiff and defendant
and an amount in controversy exceeding $75, 000, exclusive of
interests and costs.[5] “ ‘The amount in controversy
is not proof of the amount the plaintiff will recover,'
but rather, ‘it is an estimate of the amount that will
be put at issue in the course of the litigation.'
”[6] There is a strong presumption in favor of
the amount in controversy alleged by the
plaintiff.[7]

When a
case in federal court has been settled and dismissed, the
court must have an independent basis for subject-matter
jurisdiction or a basis for exercising ancillary jurisdiction
to enforce the settlement agreement.[8] Ancillary jurisdiction over
a settlement agreement exists when “the parties'
obligation to comply with the terms of the settlement
agreement had been made part of the order of dismissal,
” such as when the judge expressly retained
jurisdiction over the settlement agreement or incorporated
the terms of the agreement in the order.[9] Absent some clear
indication in the stipulation or order of dismissal that the
Court intends to enforce the agreement itself, there must be
an independent basis for federal jurisdiction.[10] An alleged
breach of a settlement agreement falls under the law of
contract, which is covered by state law.[11] Because
enforcement of a settlement agreement does not present a
federal question, subject-matter jurisdiction must be based
on diversity.[12]

III.
Analysis

When
this case first came before the Court, jurisdiction was
proper because the parties were diverse and the amount in
controversy exceeded $75, 000. The Court does not have
jurisdiction to enforce the settlement agreement, however.
While the parties presumably remain diverse, [13] RLI is
requesting only $2, 000 in relief, far short of the $75, 000
threshold.

Further,
the Court may not exercise its ancillary jurisdiction over
the settlement agreement. This case was dismissed without
prejudice by stipulation of the parties, pursuant to
Fed.R.Civ.P. 41(a)(1)(A)(ii). The parties' stipulation
made no mention of the settlement agreement, nor did it
request that the Court retain jurisdiction over the matter
until the terms of the agreement were satisfied. Thus,
jurisdiction ceased to exist; accordingly, the Court lacks
the authority to rule on this Motion to Enforce Settlement
Agreement.

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